Yahoo and Microsoft execs meet for informal talks about takeover

Yahoo, Microsoft hold informal talks

No agreement from meeting

By Benjamin Pimentel, MarketWatch

Last Update: 10:57 AM ET Mar 14, 2008

WASHINGTON (MarketWatch) - Executives from Yahoo Inc. and Microsoft Corp. met
earlier this week to discuss the software giant’s merger proposal, although the
talks did not lead to an agreement, a person familiar with the situation said.

The informal talks took place as Microsoft (MSFT) advanced deeper into the online
world after buying another company that helps companies manage their online
advertising.

The meeting between the two titans did not involve any negotiation of Microsoft’s
blockbuster bid to buy Yahoo (YHOO), initially valued at $44.6 billion, the
source said. During the session on Monday, Microsoft presented to Yahoo its
vision for a combined company.

The meeting suggests that Yahoo may be softening its stance against the Microsoft
offer which the Web portal’s board of directors rejected last month saying it
undervalues the company.

Meanwhile, in a sign of Microsoft’s aggressive push into the online arena, the
Redmond, Wash. company announced Friday that it has signed a deal to buy Rapt
Inc.

The San Francisco company makes software that helps businesses manage their
online advertising operations, including determining the most profitable pricing
and placement strategies.

Rapt’s clients include major media companies such as MTV Networks, NBC Universal
and News Corp.’s Fox Interactive Media. (News Corp. is the publisher of
MarketWatch.)

Microsoft’s bid for Yahoo is widely seen as a play for a bigger presence on the
Web and for a broader online advertising revenue base.

In rejecting the bid, Yahoo said it is exploring other options and it reportedly
has discussed possible partnerships or mergers with other media and Web giants,
including Google Inc. (GOOG), News Corporation (NWS) and Time Warner Inc. (TWX).

Yahoo recently extended the deadline for director nominations, amid strong hints
from Microsoft was planning to mount a proxy battle to takeover its board.
Analysts also saw Yahoo’s move as a way to buy more time to find another partner
or a white knight.

But no serious third party has emerged.

A reported partnership with Google has not materialized as some analysts said
such a deal would likely be hampered by anti-trust concerns.

NewsCorp. (NWS), the publisher of The Wall Street Journal and MarketWatch, has
said it is not interested in a Yahoo deal, while AOL recently announced it was
buying the social networking site Bebo, signaling that Time Warner Inc. (TWX) has
plans that don’t involve Yahoo.

Some analysts say Yahoo’s time is running out, especially amid growing
shareholder unrest. Meanwhile, the value of Microsoft’s cash-and-stock offer has
since declined to less than $42 billion, or roughly $29 a share. The reason: a
12% drop in Microsoft’s share price.

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